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Thursday’s sentencing of a gang of drug traffickers in a smoggy city in northern China that few outsiders are likely to have ever heard of offers a rare insight into how the US authorities are working with their Chinese counterparts to tackle a deadly scourge that has devastated communities across the United States.After the conclusion of the case ” which saw one gang member given a suspended death sentence and eight others jailed, two of them for life ” a group of Chinese and American law enforcement officers gathered in Xingtai, an industrial city in Hebei province, to share details of how their joint investigation had brought down an international fentanyl smuggling operation.It was the first public example of how the two countries have been working together to target the trade. Their cooperation began in 2012, when a spike in the number of overdoses linked to the synthetic opioid prompted American officials to reach out to China, the biggest supplier of the drug and its related forms and compounds.While issues such as soybeans, tariffs and 5G technology have dominated the US-China dialogue in recent years, the sale of Chinese-made fentanyl has also become a factor in the trade talks, with US President Donald Trump complaining that China is not doing enough to stop the drug from reaching America.Nine members of a drug gang were sentenced by a court in Hebei province on Thursday. Photo: AFP alt=Nine members of a drug gang were sentenced by a court in Hebei province on Thursday. Photo: AFPBut this debate has taken places against a backdrop of overdose deaths, homelessness and devastated families and communities, spurring law enforcement to carry on their collaboration throughout the ebb and flow of tensions between the two countries.”If there’s one area of cooperation globally that a lot of countries who don’t see eye-to-eye on many things, like trade, do see eye-to-eye on, it’s organised crime, criminality and trafficking,” said Jeremy Douglas, regional representative of the United Nations Office on Drugs and Crime for Southeast Asia and the Pacific.”That doesn’t mean cooperation is always easy [but it is] hugely important”.A major priority for the US has been to stop Chinese fentanyl from flooding the US black market, both through direct mail order to American customers and dealers, as well as being indirectly smuggled over the border by Mexican cartels that ship the drug and its chemical components through Pacific ports.”The drug overdose crisis in the United States is the worst that we have seen historically … in terms of other public health problems, this surpasses firearm deaths and is on par with motor vehicle deaths,” said drug policy expert Bryce Pardo.He noted the increasing role in past the six years of synthetic opioids like fentanyl, which is 50 times more powerful than heroin and in 2017 accounted for around 40 per cent of the over 70,000 drug overdoses in America, according to the US Centres for Disease Control and Prevention.”It’s very important that these two sides work together, and this requires a positive and constructive political working environment,” said Pardo, who is an associate policy researcher at the RAND Corporation think tank’s Washington office.Thursday’s meeting between US and Chinese drug enforcement officials comes at a time when the two nations are circling around an interim trade deal, although it is unlikely to include any further measures to tackle the issue.However, the two sides still have plenty of issues beyond the balance of trade to resolve, including the export of the drug from China to the US.”If [Trump] can add to the scope of his agreement with Xi by referencing things that China might do with respect to the fentanyl trade, that could be seen to be adding to what he has been able to achieve,” said Stephen Kirchner, director of the trade and investment programme at the United States Studies Centre at the University of Sydney.The synthetic opioid has been at the heart of the US drug crisis in recent years. Photo: AP alt=The synthetic opioid has been at the heart of the US drug crisis in recent years. Photo: APThe issue became a subject of conversation in talks between Trump and Chinese President Xi Jinping at the G20 summit in Argentina on December 1, and reared its head again in August as Trump prepared to levy additional tariffs and raise existing ones.”[M]y friend President Xi said that he would stop the sale of Fentanyl to the United States ” this never happened, and many Americans continue to die!” Trump tweeted on August 1, as he announced further levies on Chinese goods.A provisional agreement at the talks in Argentina led China to tighten its drug regulations as of May to treat all variants of fentanyl as controlled substances.It was an effort to close a loophole in which producers were making minor changes to the chemical compounds for fentanyl to get around China’s existing regulations on the drug, which the country’s booming pharmaceutical industry produces legally for medical use.That move and increased attention to the issue in China does appear to be having an effect, at least in the short term, according to Pardo, who said there has been a steep drop in the appearance of chemical analogues of the drug in the US, as well as reduced fentanyl seizures by US postal and delivery services.”But there’s still a lot of fentanyl showing up,” he said, noting that this could be from chemicals produced by China and sent to Mexico for manufacturing, illicit cargo shipments, or even stockpiles already in the United States.” Donald J. Trump (@realDonaldTrump) August 1, 2019Part of the challenge of stemming the tide lies with law enforcement officials in China who are tasked with ensuring that legally produced fentanyl pills or the component chemicals are not being smuggled out the “back door” of factories for shipment, according to the UN’s Douglas.Many of the chemicals involved originate from China’s large chemical industry, where the compounds used to make a range of everyday products such as food additives or pharmaceuticals originate.”That is a massive challenge because you can imagine some chemicals simply get diverted out the back door of a factory or misappropriated … it’s very hard to regulate.”International investigations, meanwhile, need to keep up with criminal syndicates that may involve a host of players from China, Mexico and US ” making international collaboration by law enforcement crucial.”There’s definitely been progress in that relationship, and the Chinese side has been very much trying to make an effort, they are really making a push to show good faith to the US,” Douglas said, that has included “clamping down” on the back-door transactions that see drugs shipped overseas.But the extent to which the role of China in the global production of the drug and its component chemicals has diminished is difficult to gauge, and observers agree that China remains a key part of the supply chain.”The producers and Big Pharma certainly have tightened up, but we know for a fact that there are stockpiles of that product … and we know that clandestine markets have been created in the wake of these regulations,” said Roderic Broadhurt, a professor of criminology at Australian National University’s College of Asia and the Pacific.He noted that unlike drugs such as heroin or cocaine, fentanyl can also be easily produced anywhere without the “long difficult logistic trains from the hills of northern Burma or western provinces of Mexico and Colombia” as long as the necessary chemicals are available.China defended its record on this front in September, with a senior narcotics commission official Liu Yuejin saying that Trump’s claims that authorities were not stopping trafficking were “completely groundless and untrue”.No fentanyl smuggling cases between the US and China have been uncovered since the new measures were implemented, Liu said at that time.Details of the cooperation between the two sides have been scant so far, and the decision to publicise the results of the recent joint investigation could be a goodwill effort, according to several experts, to show that progress is being made on a sensitive issue.This case began with a tip-off from US law enforcement in 2017 when officers from the US Immigration and Customs Enforcement in New Orleans found the telephone number of a woman suspected of smuggling fentanyl.The US authorities passed the number on to their Chinese counterparts, leading to the arrest of members of the gang that was sentenced on Thursday and “three major criminal arrests” being made in the United States.Members of the Chinese gang were convicted last year of a range of offences, including manufacturing the drug, advertising it on English language websites and shipping it to the US.Law enforcement officials have indicated that there are two further cases in the pipeline, one of which is an ongoing investigation while the other is expected to be wrapped up soon.Yu Haibin, deputy director of China National Narcotics Control Commission, and Austin Moore, an attache for US law enforcement, at a press conference after the sentencing of the drug gang. Photo: AFP alt=Yu Haibin, deputy director of China National Narcotics Control Commission, and Austin Moore, an attache for US law enforcement, at a press conference after the sentencing of the drug gang. Photo: AFPOn Thursday, the US Office of National Drug Control Policy welcomed the prosecutions as a “positive step in following through the agreement” between Trump and Xi, adding: “We look forward to further cooperation to stop the flow of these deadly substances into the United States.”It said these would include establishing regular law enforcement cooperation meetings, responding “rapidly” to new leads, expanding detection and narcotics laboratory capabilities, as well as carrying out more joint investigations.But while such successes remain good examples of international collaboration, the real challenge will be how these law enforcement efforts are able to track what experts see as an inevitable shift of manufacturing out of a stricter China and into South and Southeast Asia.Douglas said the challenge was that China was only one country out of many that could become involved in the drug supply.”There are other countries where synthetic drugs can be produced,” he continued, “and we just hope that doesn’t become the case that fentanyl production shifts to other locations, some of which don’t have the capacity to control substances like China does.”This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
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(Bloomberg Opinion) — Everything is awesome in financial markets. The sense that a trade deal may finally be on the cards sent stocks and crude soaring in the U.S. Thursday, while flight-to-safety trades such as bonds and gold slumped. Both sides seem to be moving toward a phase one agreement that would involve jointly reducing tariffs in return for vaguer concessions on the underlying issues.“If there’s a phase one trade deal, there are going to be tariff agreements and concessions,” White House economic adviser Larry Kudlow told Bloomberg.“If China, U.S. reach a phase-one deal, both sides should roll back existing additional tariffs,” China’s Ministry of Commerce spokesman Gao Feng said earlier.There’s a laconic warning buried inside both of those statements: “If.”It’s certainly possible that President Donald Trump is tiring of the trade war and as desperate to get an agreement on the table as Beijing seems to think. But the current febrile atmosphere appears to have left the fundamentals of this dispute behind. A single tweet from @realdonaldtrump could be enough to puncture the party mood.Consider some of the things you might expect to be seeing if a significant agreement was really in the works. China is well aware of the importance of the bilateral trade deficit in Washington, and one of the most promising areas for any agreement is to sharply increase imports of American agricultural and mineral products.Yet China’s biggest oil producer, state-owned PetroChina Co., is behaving as if the opposite plan is underway. In results last week, the company reported its trailing 12-month capital spending rose to the highest level since 2014, thanks to a government push to lessen China’s dependence on imported fuel.PetroChina’s returns on invested capital are already the worst of the oil majors, and pressure to extract more oil and gas from China’s unpromising geology will make that situation worse. A country that was serious about balancing out the trade relationship with the U.S. and making the most productive use of state companies’ cash would be looking for ways to tap America’s energy boom instead.It’s a similar case with agriculture. China could increase its imports of poultry, beef, pork and other products by as much as $53 billion just by removing current constraints on trade, according to a study last year by Minghao Li, Wendong Zhang and Dermot Hayes of Iowa State University.If anything, that’s probably low-balling it: You could add $10 billion to the total just by taking soybean imports back to where they were before the current round of trade tensions cut that trade close to zero. One only needs to look at China’s trade data released Friday to see that the opposite is happening. The surplus with the U.S. may be narrowing, but on a global, trailing 12-month basis it was the widest it’s been since May 2017. Part of that is simply the weakness of domestic demand. But hosting jazzy import conferences won’t change the fact that President Xi Jinping’s praise of zili gengsheng, or self-reliance, is just as pointed a retreat from trade as Trump’s “Make America Great Again” mantra.All this comes before even touching on issues around intellectual property, technology transfer and state involvement in the economy, which were ostensibly the reasons for this trade war in the first place. China continues to make quiet progress on the first front as if the trade war wasn’t happening; and formal technology transfer is shrinking, too, although stories of outright industrial espionage abound. On the third point, the Chinese state is, if anything, becoming an even more dominant economic actor than it was hitherto.What about this backdrop makes a deal seem so imminent? Beijing appears unlikely to make the sorts of concessions on the main issues under contention that would allow Trump to present an agreement as a personal victory. Trump, for his part, is presiding over a stock market that — thanks in part to all the optimism about a trade deal — hits fresh records every day, giving him no incentive to sign on to a deal that looks like a climb-down.Right now, markets are behaving as if the whole structure of trade impediments built up over the past two years could start getting dismantled within weeks. It’s quite as likely that, in the white heat of a breakdown, the levies suspended last month are reinstated, only to be followed by the final round still due to kick in Dec. 15. Should that come about, the current exuberance could turn into a hangover awfully quick.To contact the author of this story: David Fickling at [email protected] contact the editor responsible for this story: Rachel Rosenthal at [email protected] column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
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